Developing the selection and valuation capabilities through learning: The case of corporate venture capital

Abstract

The objective of this paper is to examine the impacts of experience intensity, experience diversity and acquisitive experience on the development of selection and valuation capabilities that help the parent (investor) company generate higher short-term financial returns and improve long-term strategic performance. Based on our analysis of 2110 cases of CVC investments in the VenureXpert data base, we find that industry diversity of a CVC program's experience is positively related to its selection of portfolio companies with relatively high financial potential. The CVC program's experience intensity, stage diversity of its experience, and syndication improve its selection of portfolio companies with greater strategic potential. In addition, stage diversity may enhance valuation capability. We also find that experience accumulation is more effective when a CVC program invests in a portfolio company in the later stage rather than in the early stage.